Liverpool are eyeing Real Madrid midfielder Fernando Gago.
The Daily Star says Real last night claimed Liverpool were negotiating with them for £15m-rated Gago.
But Liverpool boss Kenny Dalglish is only prepared to pay £10m for the Argentinian midfielder.
Reds director of football Damien Comolli is believed to have already opened talks with Gago's agent Marcelo Lombilla over the possible move.
Gago is a defensive midfielder who would be a direct replacement for Javier Mascherano, who left Anfield for Barcelona a year ago.
Lombilla said: "Gago needs to play and Liverpool would be a perfect club for him, Fernando wants to get back on the pitch and return to the top level and at the moment that is not possible in Madrid."
Liverpool had positive reports on Gago earlier in the season.
A source at Madrid said last night: "Fernando knows that he has no future at the club.
"There has been interest in the past from some Italian clubs and Aston Villa, but Liverpool have shown the most interest."
